Hiring your first employee in Michigan

What do you have to register for before your first payroll?

Michigan splits payroll registration between two agencies. Treasury issues the account you use for income tax withholding and sales tax, while the Unemployment Insurance Agency issues a separate employer account number. The paper application is one form covering both, because Treasury forwards the unemployment schedules on, but the online routes are separate systems. Plan on two accounts, two logins and two filing calendars even if you started from a single form.

Does Michigan require income tax withholding?

Yes. You register with the Michigan Department of Treasury, before your first michigan payroll. paper applications should be mailed at least six weeks before you intend to start; online registration is authenticated in minutes.

The trap that catches out-of-state employers is the second layer: twenty-four Michigan cities levy their own income tax, and city withholding is owed by an employer that merely does business in the city, even with no office there. Detroit's own guide uses an out-of-state construction firm as its example. Detroit is administered by Treasury and needs no separate registration if you are already registered for state taxes, but the other twenty-three cities, including Grand Rapids, Lansing and Flint, run their own systems and you must register and file with each separately.

What unemployment insurance does Michigan charge a new employer?

A new Michigan employer pays 2.7% on the first $9,000 each employee earns, so roughly $243 per employee in the first year. A new non-construction employer pays 2.7% for its first two years, and construction employers instead get the average construction contractor rate. You become liable at very low triggers, the easiest being $1,000 in gross wages in a calendar year. The wage base has a catch worth real money: the default base in law is $9,500, and the reduced $9,000 applies only to a qualified employer, meaning one that has filed every quarterly report and owes no unpaid balance of $25 or more. Fall behind on a single report and you pay tax on an extra $500 per employee.

Do you need workers compensation insurance in Michigan?

Yes, from your first employee. Michigan sets no headcount to reach, so there is no free window before coverage is required.

• any private employer regularly employing one or more employees 35 hours or more per week for 13 weeks or longer in the preceding 52 weeks
• any private employer regularly employing three or more employees at one time, including part-time employees
• agricultural employers with three or more employees working 35 hours or more per week for 13 consecutive weeks

Michigan has two triggers and you are covered if either fires, which is what people get wrong. One full-time employee working 35 hours a week for 13 weeks obliges you to carry coverage, and separately any three employees at one time obliges you even if all three are part-time. Owners are not always outside the count: a partner counts as an employee of the partnership, a corporate officer counts as an employee of the corporation, and a member who is a manager counts as an employee of an LLC, though a true sole proprietor never counts against themselves.

Coverage can be satisfied by buying insurance, qualifying as a self-insurer, or properly executing an exclusion form with the agency. The exclusion route is narrow and paperwork-driven rather than a general opt-out.

How quickly must you report a new hire in Michigan?

Within 20 days of the hire date, meaning the date services are first performed for pay. Reports go to the Michigan New Hires Operation Center, Office of Child Support.

The clock starts on the first day services are performed for pay, not the day the offer letter was signed. Seasonal and temporary hires count, and so does a returning employee previously on your payroll. Reports missing mandatory fields are simply not processed, so an incomplete filing is the same as no filing.

Does Michigan have paid family leave or state disability insurance?

No. Michigan runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Michigan runs no state disability or paid family leave fund, so there is no payroll deduction. What it does have, since February 2025, is the Earned Sick Time Act, which is employer-funded rather than insured: employees accrue at least one hour of paid sick time for every 30 hours worked. Employers with 11 or more employees may cap use at 72 hours a year, while a small business of 10 or fewer may cap at 40. The sting is that once you employ 11 or more people for 20 or more workweeks you lose small-business status for the rest of that year and all of the next, so a busy summer moves you to the higher tier well into the following year.

Do you need a sales tax permit in Michigan?

Treasury confirms in writing that there is no fee for a Michigan sales tax licence. The licence runs January to December and renews automatically unless you cancel, so there is nothing to re-apply for. Michigan has no city or county sales tax, so the rate is flat statewide and you file one return rather than tracking local jurisdictions, which makes it one of the simpler states to sell into. Selling without a licence is a misdemeanour, so the free licence is not one to skip.

Security deposits. Normally none, but the law lets Treasury demand a surety bond of not less than $1,000 and not more than $25,000 where it thinks security is needed, typically when the applicant or its officers have a history of unpaid tax. Cash may be deposited instead, capped at the estimated tax payable over one year.

Does a marketplace like Amazon or Etsy handle the tax for you?

The facilitator must remit Michigan sales tax on everything it facilitates, whether or not the underlying seller has nexus of its own, and Treasury will audit the facilitator rather than you unless you gave it incorrect information. If every one of your Michigan sales runs through a registered facilitator you do not need your own registration, but any direct-to-customer sales put you straight back into the threshold test.

If your sales drop, when can you stop collecting?

Dropping below the threshold does not end your obligation that year. You keep collecting until a full calendar year has passed in which you met neither component of the test, so a seller that qualified in one year and fell below the next still owes tax on all of that second year and only stops the following January. The practical effect is a trailing period of up to two years of filing after your last big year, and any tax you do collect during the wind-down must be remitted or refunded to the customer.

Does Michigan charge a tax on revenue rather than profit?

Michigan used to have one and no longer does. The old Michigan Business Tax included a modified gross receipts tax, but it was replaced by the Corporate Income Tax in 2012 and survives only for businesses holding an unused certificated credit. What remains is a tax on income rather than receipts. Gross receipts survive only as a filing screen: a taxpayer with less than $350,000 of Michigan-allocated gross receipts is not required to file or pay.

Do you have to register your out-of-state company in Michigan?

Foreign LLC $50. Foreign profit corporation $60, being a $10 fee plus a $50 initial franchise fee. Foreign non-profit is $20. Neither qualification form can be filed online; both must be mailed or delivered. Expedited review is extra, from $50 for 24-hour handling up to $1,000 for one-hour service.

Qualifying is separate from registering for tax, and hiring one person in Michigan will usually put you over the line into transacting business. Skipping it is expensive in a specific way: an unqualified foreign LLC cannot bring or maintain a lawsuit in a Michigan court until it obtains a certificate of authority, it owes the state all the fees it would have paid had it qualified, and it faces a civil penalty of $100 to $1,000 for every month it operated without one.

Where these figures come from

Every number on this page was read on Michigan's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.